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Selling Options on Futures?


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Selling Options on Futures?

  #6711 (permalink)
rajab
westhills california US
 
Posts: 94 since May 2015
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dvbattul View Post
Hi,
For the past few days, SPX has been flirting with 200-day MA which is considered a brick wall. It traded below it also. If two lower highs and two lower lows are formed below 200 MA, then downtrend may be in place. But then will it affect the strategy here? I don't know. I am staying on sidelines till clear picture emerges which means may mean missing on this month's trade. I am not so much worried about the volatility but the possibility of downtrend affecting the strategy here.
Regards,
Dilip

Obviously the strategy has been affected. I am still hanging on to a contract I opened on Jan 22(DTE=115).. 73 days later still waiting. This strategy worked perfectly for 2017. Just what I have noted the first quarter of 2018. myrrids 3% diversified rule may be better, but it requires lots knowledge that I dont have. Any suggestions?

Thanks
Babak

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  #6712 (permalink)
 ron99 
Cleveland, OH
 
Experience: Advanced
Platform: QST
Broker: QST, DeCarley Trading, Gain
Trading: Options on Futures
Posts: 3,081 since Jul 2011
Thanks Given: 980
Thanks Received: 5,785


rajab View Post
Obviously the strategy has been affected. I am still hanging on to a contract I opened on Jan 22(DTE=115).. 73 days later still waiting. This strategy worked perfectly for 2017. Just what I have noted the first quarter of 2018. myrrids 3% diversified rule may be better, but it requires lots knowledge that I dont have. Any suggestions?

Thanks
Babak

You had bad luck to enter 5 days before peak. It happens. Be glad you still have them and haven't had to exit at a huge loss.

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  #6713 (permalink)
tinaturner
BARCELONA/SPAIN
 
Posts: 33 since Sep 2013
Thanks Given: 2
Thanks Received: 2


Hi Ron
I'm thinking open your -2+3 strategy. I'm looking for EW3N8 but it's low liquidity. You trade this weekies or you think is better discard them?

Thanks a lot.

Ramon

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  #6714 (permalink)
 manuel999 
Germany
 
Experience: Intermediate
Platform: TWS
Trading: Options on futures
Posts: 155 since Jul 2014
Thanks Given: 341
Thanks Received: 142


rajab View Post
Obviously the strategy has been affected. I am still hanging on to a contract I opened on Jan 22(DTE=115).. 73 days later still waiting. This strategy worked perfectly for 2017. Just what I have noted the first quarter of 2018. myrrids 3% diversified rule may be better, but it requires lots knowledge that I dont have. Any suggestions?

Thanks
Babak

Yesterday I closed the spread I have opened Jan 12.
It had quite a drawdown, but was never really in danger. Thus I see it as a confirmation of Ron's strategy.

Nevertheless, I started with the strategy end of 2016, and got used to the environment of a relentless low IV.
I am not yet mentally attuned to the new environment.
Normally I would opened a new spread today, but I will wait until next week.

I continue to sell options in other commodities. Currently I have sold Calls on CL 80 and ZW 600, and Puts on LE 90

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  #6715 (permalink)
 ron99 
Cleveland, OH
 
Experience: Advanced
Platform: QST
Broker: QST, DeCarley Trading, Gain
Trading: Options on Futures
Posts: 3,081 since Jul 2011
Thanks Given: 980
Thanks Received: 5,785


tinaturner View Post
Hi Ron
I'm thinking open your -2+3 strategy. I'm looking for EW3N8 but it's low liquidity. You trade this weekies or you think is better discard them?

Thanks a lot.

Ramon

I'm not seeing low liquidity. Right now I see bids that are 300+ quantity and asks that are 1000+ quantity. They are < 50 cents apart.

When ES options are above 5.00 premium that they trade in 0.25 increments. Place offer on short 0.25 higher than the bid.

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  #6716 (permalink)
dvbattul
Singapore
 
Posts: 46 since May 2015
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rajab View Post
Obviously the strategy has been affected. I am still hanging on to a contract I opened on Jan 22(DTE=115).. 73 days later still waiting. This strategy worked perfectly for 2017. Just what I have noted the first quarter of 2018. myrrids 3% diversified rule may be better, but it requires lots knowledge that I dont have. Any suggestions?

Thanks
Babak

Hi Babak,
I thought after 30 days you are supposed to exit as the premium for long option will erode faster. I did not have any trade then, so not sure how the premiums changed.
Regards,
Dilip

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  #6717 (permalink)
rajab
westhills california US
 
Posts: 94 since May 2015
Thanks Given: 130
Thanks Received: 20


dvbattul View Post
Hi Babak,
I thought after 30 days you are supposed to exit as the premium for long option will erode faster. I did not have any trade then, so not sure how the premiums changed.
Regards,
Dilip

Actually the long options seem to have been doing well up until it hit the 60 day mark. The decay seem to have acceletated at 45 DTE. I know IV plays a big role in option decay not to mention all the other variables. The strategy for -2,+3 puts is as follows: Exit at 50% of premium for profit, or when the difference in (- premium) + maintance margin is greater than 5 or 6 times the initial margin(IM). In my case the IM is x10.

Babak

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  #6718 (permalink)
 ron99 
Cleveland, OH
 
Experience: Advanced
Platform: QST
Broker: QST, DeCarley Trading, Gain
Trading: Options on Futures
Posts: 3,081 since Jul 2011
Thanks Given: 980
Thanks Received: 5,785


dvbattul View Post
Hi Babak,
I thought after 30 days you are supposed to exit as the premium for long option will erode faster. I did not have any trade then, so not sure how the premiums changed.
Regards,
Dilip

I don't believe anyone has posted that you exit after 30 days.

If you did exit at 30 days you would have many losing trades.

The strategy is selling 2 options for more than the cost of 3 long options. So as long as you don't have to exit because of a margin call, eventually this trade will be profitable even if you have to wait until expiration.

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  #6719 (permalink)
dvbattul
Singapore
 
Posts: 46 since May 2015
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ron99 View Post
I don't believe anyone has posted that you exit after 30 days.

If you did exit at 30 days you would have many losing trades.

The strategy is selling 2 options for more than the cost of 3 long options. So as long as you don't have to exit because of a margin call, eventually this trade will be profitable even if you have to wait until expiration.

Thanks, Ron for pointing out my mistake. Yes, the rule says exit at 50% drop in premium.
I had made a note based on your Excel file that averaged days the spread was held were 27 days for one long at 1.5 delta and 2 shorts at 5 delta . Based on that I quoted wrongly that one has to exit after 30 days. I checked the file and other backtesting files and found that sometimes the spreads were held for more than 30 days up to 70 days too.
My apologies for quoting wrong exit criterion.
Regards,
Dilip

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  #6720 (permalink)
 manuel999 
Germany
 
Experience: Intermediate
Platform: TWS
Trading: Options on futures
Posts: 155 since Jul 2014
Thanks Given: 341
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dvbattul View Post
Thanks, Ron for pointing out my mistake. Yes, the rule says exit at 50% drop in premium.
I had made a note based on your Excel file that averaged days the spread was held were 27 days for one long at 1.5 delta and 2 shorts at 5 delta . Based on that I quoted wrongly that one has to exit after 30 days. I checked the file and other backtesting files and found that sometimes the spreads were held for more than 30 days up to 70 days too.
My apologies for quoting wrong exit criterion.
Regards,
Dilip

The spread I closed last week I held 83 days.
There were a couple of times in the last month when it was almost there, but then IV spiked again a bit, preventing me from closing.
The last two weeks I let it go a bit longer, since I was not sure if I would open a new spread, so I garnered some more time decay with the old spread. In the end I closed it at 70% gain.

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